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Yr1 The International Economy Flashcards

1
Q

PART 1

A

GLOBALISATION

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2
Q

PART 2

A

TRADE

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3
Q

PART 3

A

THE BALANCE OF PAYMENTS

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4
Q

What is the main gov objectives linked to balance of payment?

A

Maintain a satisfactory balance of payment

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5
Q

Definition of balance of payments?

A

A record of all of the currency flows in and out of a country in a particular time period

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6
Q

Definition of trade deficit?

A

Imports > exports

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7
Q

Definition of balance of trade?

A

Difference between imports and exports and goods and services

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8
Q

Definition of trade surplus?

A

Exports > imports

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9
Q

What are the 3 things included in the balance of payments + definition of each?

A
  1. Current account
    - trade of goods in and out countries e.g. debit//credit
  2. Capital account
    - movement of money for investment purposes
  3. Financial account
    - included direct investment, portfolio investment , reserve assets
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10
Q

What are the 4 part of the current account + definition?

A
  1. Trade in goods
  2. Trade in services
  3. Primary income
    - investment from abroad + remote working
  4. Secondary income
    - money contributions e.g. EU, aid, grant
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11
Q

What is the equation for a circular economy linked to the 3 types of account?

A

Current = capital + financial

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12
Q

What would cause a current account deficit?
1. Demand side
2. Supply side

Opposite for account surplus

A
    • strong domestic growth
    • recession overseas
    • strong exchange rate (SPICED)
    • low investment
    • low productivity
    • high relative inflation
    • high unit labour cost
    • poor quality/ reliability
    • depletion of resources
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13
Q

PART 4

A

EXCHANGE RATE SYSTEMS

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14
Q

PART 5

A

ECONOMIC GROWTH AND DEVELOPMENT

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15
Q

What is the definition of economic growth?

A

An increase in the output that an economy produces overtime
- increase in an economy’s productive potential (outwards shift in the PPF)

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16
Q

Factors affecting short run economic growth?

A
  • interest rates
  • exchange rates
  • consumer + business confidence
  • fiscal policy
  • commodity prices
  • trading conditions in other countries
17
Q

Factors affecting long run economic growth?

A
  • labour supply
  • investment
  • productivity
  • research
  • innovation
  • enterprise
18
Q

Characteristics of a recession?

A
  • two quarters of economic growth
  • struggles to pay off debt
  • decreasing consumer spending
  • decreasing trade
  • increasing unemployment
19
Q

Characteristics of a slump (or trough)?

A
  • low levels of employment and high unemployment
  • low consumer spending
  • high levels of business failure
  • increase in redundancies, particularly in the service sector
20
Q

Characteristics of a recovery?

A
  • increasing economic growth
  • increasing employment levels
  • possible GDP growth
  • house prices will rise
21
Q

Characteristics of a boom (or peak)?

A
  • incr in tax receipts + public spending
  • low welfare or benefit claims
  • rise in consumer spending and borrowing
22
Q

What are some evaluation points of economic growth policies?

A
  1. Incidence: state of the economy (recession vs boom)
  2. Side effects: equality + environment
  3. Speed of changes to the economy
  4. Permanence of the growth
  5. Interest rates
  6. Comparison to other countries growth
  7. Resource levels of the country
23
Q

What does the importance of economic growth depend on compared to other economic objectives?

A
  1. Consumer confidence levels
  2. Impact of inflation
  3. Stage of economic cycle the country is in
  4. Importance of other macroeconomic objectives
  5. Where on the PPF
  6. Developed / developing economy
24
Q

What is economic development?

A

An improvement in the quality of life and living standards e.g. measures of literacy, life-expectancy and healthcare etc

25
Q

How can economic growth lead to development?

A
  1. Raised out of extreme poverty
  2. Households + firms given better financial resources (C + I)
  3. Creates new jobs > accelerator effect
  4. Reduction in income and wealth inequality
  5. Higher profits reinvested
  6. Accelerate changes in patterns of production
  7. Higher tax revenues
26
Q

Barriers to growth and development?

A
  1. Unequal distribution as only a small % of the economy benefit
  2. Corruption
  3. Inefficient allocation of resources
  4. Environmental problems
  5. Military spending
  6. Condition of the economy e.g. location + resources
27
Q

Give some information on the economic growth and development of Sri Lanka?

A
  • export heavy
  • fiscal balance
    > deficit since 2012
    > further worsened by tax cuts + covid (-12% in 2020)
  • 2022 > default on debt so 20% interest on borrowing
  • low gross official reserves + incr poverty since 2022
  • IMF approves $3bn bailout (0.0031 Sri Lankan Rupee = $1 USD) > decr 50%

Economics Macro (6 decks)

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